Coronavirus: timid recovery in China, fear of almost zero growth

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The arrival of the coronavirus epidemic in China had put an unprecedented halt to the production and operation of businesses in the country in February due to containment measures.

Technically, the purchasing managers’ index which serves as a benchmark for assessing economic activity had fallen to a historically low level at 35.7 points.

In March, the worst seems to be over. This index, somewhat to the surprise of analysts, stood at 52 points. Without going into detail, you should know that a result above 50 points means that the activity is expanding.

The slowdown in contagion in the country and the gradual lifting of containment measures made it possible to restart even at idle the factories, as for the French automotive group PSA.

However, this resumption of activity does not mean that the country has returned to its pace before the Covid-19 crisis. It will take several months, according to analysts, to regain this level.

Strong fall in domestic demand

Especially since domestic demand, which fell 20.5% in the first two months of 2020, will also take time before resuming.

During the confinement period, the income of many people literally collapsed.

According to a study by the University of Beijing, the employees in tourist places, the companies of BTP or even in the trade, the incomes fell by nearly 50% in February.

In an attempt to restart the machine, the authorities have sent messages to encourage people to go to restaurants or shops. Some provinces have even implemented vouchers.

Towards zero growth

Will these measures be sufficient? During the 2008-2009 financial crisis, Chinese leaders launched a massive stimulus package in infrastructure, which does not seem to be the case this time.

If in January, the World Bank still expected growth of 5.9% for the country in 2020, the worst-case scenario is now feared with, according to the World Bank, almost zero growth of 0.1%.

“It remains to be seen whether the Chinese government can reactivate economic activity as abruptly as it stopped it,” said the Washington institution, adding that “indirect estimates, such as pollution indicators, show that the activity is only gradually increasing in China. “

According to the World Bank, growth in the Asia zone could slow to 2.1% compared to 5.8% in 2019 and may even be contracting by 0.5% in the most pessimistic scenario.

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